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Stockscom Report for Sunday Nov 28 2004
Publisher: Colin Alexander Editor: Ken Wilson
Subscriptions and Administration: Pierre Fichaud (toll-free: 866-487-9711)
Market Synopsis
There are signs of intensifying action to lower the value of the US dollar in an effort to reduce the current account deficit, which is ballooning out of control. For far too long the US has been the consumer while Asia has been the manufacturer creating an enormous economic imbalance in need of correction. At this moment, the US must import over $2 billion per business day in order to fund the CA deficit and with high energy prices unlikely to ease within the next few months, the deficit threatens to become larger before it begins to shrink.
Despite the Bush Administration’s rhetoric in favor of a
strong US dollar, Greenspan’s comments in Europe last week warning of potential
future difficulty in attracting capital was a loud wake-up call to Congress to
start improving the management of the country’s finances . He alluded to news
that central banks in Russia, China and India have publicly stated a desire to
diversify foreign reserves away from the US dollar when he said "…a diminished appetite for adding to
dollar balances must occur at some point." Or perhaps he was just studying
the record of treasuries sales for the month of August when foreign private
investors dumped $4.4 billion in US debt – the first month in a year that there
were net sales, not purchases, for the month. Fortunately, foreign central
banks made appearances at these August auctions and ensured some continuity in
net monthly purchases.
With the recent losses in the dollar vis-à-vis the euro currency and the Japanese yen, two of the most noticeable currency imbalances have shown improvement. But it is the Chinese currency peg to the dollar which remains unfashionably rigid and a lightening rod for dispute. In August alone, the trade deficit with China reached a new record high of $15.4 billion and since the Chinese have tied their currency to the dollar, expectations are that the deficit will continue unabated. Even amongst their Asian neighbors, the Chinese are causing consternation since many of these Asian Tigers have seen their currencies appreciate versus the dollar and exports are suffering as a result. As for both Europe and Japan, these important trade deficits could see some corrective phase occurring with the low dollar but the extent of this correction is dependant on their respective governments inducing greater domestic demand. It is surely one of the great global ironies that these export-dependant economies rail against the US trade deficit yet rely heavily on the American consumer for their own economic well-being.
Technically Speaking
This being a holiday shortened week, there was little to add to last week’s comments except that a retracement at this point would be more than welcome for the gain since the end of October has been rather steep. This powerful rally probably does not require much downshifting before it reasserts itself with a new leg higher.
This current rally has produced new yearly highs for both the S&P 500 and the Nasdaq-100 leaving both the DJ-30 and the Nasdaq Composite to reach new highs.
New Buy Recommendations:
None.
New Short Sales
None.
Stock Positions to Sell/Exit:
None.
Portfolio Comments:
New stops have been added to the list while others have been modified. Those that have blanks, are being carried unstopped for now. Please see our complete list of stops in the table below.
List of Current Stock Recommendations:
Action Ratings. The following is the legend for designating immediate action
for our stock recommendations. The first is B, meaning the stock is timely
to buy but the case for doing so right here is not overwhelming. Either the
stock may have gotten ahead of itself and may be vulnerable to a retracement or
else the stock has been performing disappointingly but may simply be
regrouping. B+ and B++ indicate stocks for which there is a technical case
to buy now, with plusses adding weight according to how many there are, up
to a maximum of two. Stocks rated H are ones to hold, awaiting confirmation
to buy more or to sell. SELL, of course, means what it says. It seldom pays
to override this designation. In the case of stocks held short, the rating is S
where positions should be retained. S+ and S++ indicate stocks for which there
is a technical case to add to the positions with plusses adding weight similar
to long positions. The maximum number of plus signs is 2.
Stocks marked # are eligible as Canadian content in Canadian RSP funds.
Otherwise there is a 30 percent restriction on foreign stocks held in these
accounts.
|
Date of Entry |
Name |
Symbol |
Entry Price |
Current Price |
Stop |
Action Rating |
|
08/23/04 |
AES |
AES |
10.23 |
12.77 |
9.50 |
B |
|
11/08/04 |
Cryptologic |
CRYP # |
18.58 |
21.26 |
|
B |
|
11/19/04 |
Essex Corp |
KEYW |
17.69 |
19.32 |
|
B |
|
11/08/04 |
F5 Networks |
FFIV |
42.38 |
41.75 |
|
H |
|
11/08/04 |
Ipsco |
IPS # |
31.69 |
38.09 |
|
B |
|
11/08/04 |
MFRI Inc |
MFRI |
7.41 |
7.06 |
|
H |
|
08/09/04 |
Pan Amer Silver |
PAAS # |
13.40 |
18.65 |
|
B+ |
|
09/27/04 |
Petro-Canada |
PCZ # |
50.90 |
56.92 |
|
B+ |
|
11/05/04 |
Placer Dome |
PDG # |
22.12 |
22.65 |
|
B |
|
11/08/04 |
Potash Corp |
POT # |
73.85 |
75.84 |
|
B |
|
08/16/04 |
Suncor |
SU # |
28.50 |
35.36 |
|
B+ |
|
03/08/04 |
Transcanada Corp |
TRP # |
21.34 |
24.62 |
19.00 |
B |
|
09/20/04 |
Ulticom |
ULCM |
13.24 |
17.38 |
14.95 |
B+ |
|
09/20/04 |
Vintage Petroleum |
VPI |
18.44 |
23.58 |
|
B+ |
New stops in BOLD
* Stop on a closing basis
** Buy if above entry price